Bolland hits the buffers: M&S gets wet clothes

The M&S boss is under pressure as the chain is hit by falling clothing sales and stock problems.

If you look at total sales, the picture doesn’t look all too bad: they’re only down 0.7%, but unfortunately, we’re interested in the like-for-likes, which are a lot worse. In food, the chain was up a modest 0.6%, but in its ‘general merchandise’ category, which is essentially the clothes business, it was down a whopping 6.8%. The retailer has suffered from stock issues including having run out of some of the most popular lines of womenswear during April. That’s a bit of a stinger for the traditional barometer of the British high street.

Chief executive Marco Bolland remains positive, focussing on the food business, which ‘has again performed strongly’, but acknowledging that general merchandise ‘underperformed’ – something of an understatement. He assured shareholders that ‘we are confident we are taking the necessary steps to address this,’ but he didn’t go into any detail whatsoever. It’s not a stretch to imagine that he doesn’t really know what steps to take, with his zero years of experience in clothing retail prior to M&S. Having come from Morrisons and then Heineken before that, women’s underwear sales will be at least unfamiliar territory to him…

Shareholders don’t seem to perturbed however. Despite an early plunge in the share price first thing this morning, the stock is currently around 1.5% up (at the time of writing). We think that, in M&S’ defence, the wettest June on record (and one of the wettest Julys so far) probably counts as exceptional circumstances, meaning many shareholders will see the bad performance in clothing as a blip rather than a sign that the company is in bad health. The share price has stabilised after May’s results showed the company suffered its first fall in annual profits for three years, down 16% from £781m to £658m.

The results are uncomfortable for M&S for a couple of other reasons, too. Not least because the chain’s head of general merchandise, Kate Bostock, announced her departure today. She is rumoured to be joining online clothing retailer Asos, which has just posted a 31% in rise in sales for its first quarter. Another stinger for M&S! Bostock was already in talks last year to become managing director of the online retailer, which today announced sales of £137m to June 30. It is worth noting though, that UK sales growth was a much more modest 8%, as most of Asos’ growth is in overseas markets. Bostock will be replaced by John Dixon, a Sparks veteran, and new joiner Belinda Earl arrives from Jaeger.

M&S shouldn’t be too disheartened however: when the rain is coming down in sheets, footfall will suffer and the online-only players will enjoy a bit of a boom. Maybe when the sun finally comes out again then the tables will turn…

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